Salary Floor Non-Compliance: Clearing up a FAQ

One of the main themes that has emerged in the world of the salary cap era has been the requirement that all teams spend a minimum amount on player salaries for any upcoming year. As the cap has risen, so too has the salary floor. While teams like the Red Wings have already surpassed the $48.3M minimum spending requirement, Capgeek.com currently shows five NHL clubs which will have to spend more money in this offseason to be compliant within that rule (Winnipeg, Phoenix, Colorado, Nashville, and the Islanders).

Those who have a very detailed knowledge of the NHL's collective bargaining agreement have mentioned several ways that teams can build cap hits which reach the floor without having to spend the actual dollars. Aside from buyouts (which do require spending the actual cash) and offering long-term backloaded deals, there is a means for clubs that comes available only this season because of the expiration of the CBA: Teams can load up on entry-level and over-35 players with basically unattainable bonuses (which will count against the cap this season, even if they're not met). Chemmy from Pension Plan Puppets explains in great detail here.

Getting back to basics though, one of the most persistent questions I've seen from around the hockey blogosphere asks the simple question of "what if one of these teams decides to thumb his nose at this part of the CBA and simply not field a team that meets the salary floor?  What punishment is there?" 

Keep reading to find out.

To frame this, know one simple concept: The CBA does not really differentiate between exceeding the upper limit and cutting under the lower limit. The only time that a differentiation happens is in some of the real-world punishments handed out. Regardless of whether a club tries to sign a guy to a contract that puts them $10M over the cap or fails to sign enough players, that team is viewed as being noncompliant with Article 50 of the CBA.  To find the punishments, we go to Article 26:

ARTICLE 26
NO CIRCUMVENTION

Preamble. It is the parties' intention that there be full, accurate and timely disclosure and reporting of all revenues and financial information as required by Article 50, as well as of any and all agreements involving payments to Players, and that such disclosures and agreements be consistent with this Agreement, including but not limited to the provisions of Article 50. This Article 26 is designed to prohibit and prevent conduct that Circumvents the terms of this Agreement, while not deterring or prohibiting conduct permitted by this Agreement, the latter conduct not being a Circumvention.

26.1 General. The activities described or referred to in, or expressly prohibited by, Sections 26.2 through 26.7, and 26.15, whether completed or attempted, directly or indirectly, shall be deemed Circumventions under this Agreement and shall be penalized as described in and provided by Section 26.13.

In layman's terms, this is the roadmap we're looking for. It tells us that the league won't tolerate anybody breaking these rules. 26.1 there gives us a non-exhaustive list of ways a team can find itself in trouble. For our purpose (non-compliance with the cap), we go to 26.3.  To prevent the eye-strain on the mumbo-jumbo, I've bolded the key part of this:

26.3 Circumventions.
(a) No Club or Club Actor, directly or indirectly, may: (i) enter into any agreements, promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind, whether express, implied, oral or written, including without limitation, any SPC, Qualifying Offer, Offer Sheet or other transaction, or (ii) take or fail to take any action whatsoever, if either (i) or (ii) is intended to or has the effect of defeating or Circumventing the provisions of this Agreement or the intention of the parties as reflected by the provisions of this Agreement, including without limitation, provisions with respect to the financial and other reporting obligations of the Clubs and the League, Team Payroll Range, Player  Compensation Cost Redistribution System, the Entry Level System and/or Free Agency. (i) Any act by a Club Actor that, if committed by the Club would constitute a Circumvention, shall be imputed to the Club and shall
be deemed to be a Circumvention by the Club.

Again, simplifying this down, the part we're looking for is that part which states that a club cannot fail to take action in a way that makes them noncompliant with the floor (Team Payroll Range). They're simply not allowed to not sign enough people to enough money to meet the lower limit.

So, knowing this, what does 26.13 referenced above have to say about punishments?  Well, aside from saying that the league and the NHLPA have to talk about it and decide whether they want to fight over it, the CBA gets to the meat and potatoes in subsection c:

(c) In the event that the System Arbitrator finds that a Circumvention has been committed by a Player or Player Actor, the System Arbitrator may impose any or all of the following penalties and/or remedies set forth below. In the event that the System Arbitrator finds that a Circumvention has been committed by a Club or a Club Actor, the Commissioner may impose any or all of the following penalties and/or remedies set forth
below:

As far as a few more complex issues are involved, I don't see the NHLPA fighting the league on wanting to punish a club that's not paying as much as the CBA says it should.  I also want to point out that all of these punishments are at the commissioner's discretion. He may choose to do nothing if he so wishes.  All in all there are eight possible penalties prescribed, but I'm only going to include the ones that would fit in this situation:

  • Impose a fine of up to $5 million in the case of a Circumvention by a Club or Club Actor, but in no circumstances shall such fine be less than $1 million against any Club or Club Actor if such party is
    found to have violated Article 50 of this Agreement. (A "Club Actor" is any member of the club, but most likely the GM)
  • Direct a Club to forfeit draft picks (the number, placement, and League Year of which shall be determined in the Commissioner's sole discretion)
  • Declare a forfeiture of any NHL Game(s) determined to have been affected by a Circumvention
  • Suspend any Club employee, Player, or Certified Agent involved in such a violation for a period of time determined in the sole discretion of the Commissioner, the System Arbitrator, or the NHLPA, respectively

As in most legal documents, you have to search in other places sometimes, because that list is not exhaustive and it turns out that not all punishments are discretionary:

50.12 c (iii)Non-Compliance Provisions. In addition to the provisions of Article 26 of this Agreement, the NHL shall discipline Clubs for material and intentional non-compliance with these provision, provided, however, that a Club's first offense shall carry a mandatory fine in the amount of any revenue discrepancy plus $1 million, plus the loss of a first-round draft choice,

Now, there is quite a bit to be discussed about using the "commissioner's discretion" to jockey for public perception in an upcoming CBA year, but that is an open-ended debate that we can have at a later date. For now, just know that a team which refuses to spend up to the salary floor is putting itself at risk of some pretty severe sanctions.

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